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Grassland usage under a reduced policy budget: FARMIS to Switzerland What areapplied differences between Switzerland and Wales? Judith Hecht, FiBL, Switzerland Simon Moakes, AU-IBERS, Wales Content • Objectives of MultiSward • FARMIS the model – – – – – – – – Characteristics Can be used to analyse impacts... Data and Sampling Input/Output coefficients Calibration: The basis year The Baseline The Scenario The Results • FARMIS an example – Policy scenarios – Results – Summary and Outlook http://www.multisward.eu Objectives of MultiSward • Defining roles of grassland at different levels in terms of economic, agronomic and evironmental perspectives • Objectives Task 5.3: Evaluation of scenarios by modelling the socio-economic and environmental impacts. • To analyse the impact • of a) general CAP changes, b) specific policies, c) innovative policy options and d) technological innovations • on a) the viability and persistence of grassland-based systems, b) their output production and c) the quality of the environment. • in a) Switzerland, b) Germany and c) Wales http://www.multisward.eu FARMIS: Characteristics • Farm groups are flexible and based on a) farming system, b) region, c) size, d) farm type (arable, mixed, animal) • Farmers maximise income subject to several constraints (for instance land) • Farmers choose levels of 29 plant production and 15 animal production activities http://www.multisward.eu Comparative static, and sector consistent farm group model for the German and Swiss agricultural sector FARMIS: Can be used to analyse impacts… • that cause a change of the relative profitability • that are initiated by changes in agricultural policies • that commence an adaptation of the behaviour of farmers • that occur on different levels http://www.multisward.eu FARMIS: Data and sampling real world model world approx. 60’000 farms farm specific aggregation factors 2075 FADN farms 30 Farm groups Data preparation and processing 1. 2. 3. 4. http://www.multisward.eu Selection of identical farms for two consecutive years Calculation of improved aggregation factors Grouping of single farm data Generation of consistent model coefficients FARMIS: Input/Output coefficients activity dairy cow Inputs Outputs forage milk labour manure etc., … beef CH4 http://www.multisward.eu etc., … FARMIS Calibration: The Basis year Dairy cow Max! 1500*Xdairy_cow + 250*Xfattening_bull Subject to the following logical constraints: 100 112*Xdairy_cow + 12*Xfattening_bull 30*Xdairy_cow + 15*Xfattening_bull Forage 50/100 Xdairy_cow, Xfattening_bull <= 2800 h <= 1500 GJ ME >= 0 50 Optimal solution LP: 18 dairy cows + 64 fattening bulls Empirically observed: 9 dairy cows + 64 fattening bulls 25 Labour 25/233 Due to hidden costs of dairy cow production Fattening bull 100 http://www.multisward.eu 200 FARMIS: The Baseline determines numbers of dairy cows for dairy cow farms considering hidden costs and future developments of coefficients FARMIS in order to maximise income subjected to a) ∑Xi ≤ b1, total land constraint b) Xi ≥ 0, non-negativity constraint c) X1 ≤ b2, calibration constraint http://www.multisward.eu aggregates sector consistent results FARMIS: The Scenario determines numbers of dairy cows for dairy cow farms considering hidden costs, future developments of coefficients and assumptions according to future political conditions FARMIS in order to maximise income subjected to a) ∑Xi ≤ b1, total land constraint b) Xi ≥ 0, non-negativity constraint c) X1 ≤ b2, calibration constraint http://www.multisward.eu aggregates sector consistent results FARMIS: The Results Basis year 2007 e.g. parameter amount of milk produced in year 2007 (eventually regional differentiated) Environmental indicators Economic parameters Production quantities http://www.multisward.eu Baseline and Scenario 2020 Policy scenarios Basis Year 2006/ 2007 Baseline 2020 Scenarios for 2020 Scenario1 Scenario2 Scenario3 Budget level 100% Budget distribution Payment system in the basis year (2006/2007) Development of coefficients http://www.multisward.eu 100% 100% 85% 85% (homogenous reduction between programs) (reduce payments related to arable land increase payments related to extensive grassland usage) Payment New system equal payment to basis year system (2006/2007) New Payment system New Payment system Prices, Prices, technical technical progress etc. progress etc. Prices, technical progress etc. Prices, technical progress etc. Results Scenarios for 2020 Scenario1 Scenario2 as share of Scenario1 Scenario3 as share of Scenario1 Production of milk 1 0.99 0.98 Production of beef 1 0.99 0.98 Area of arable land 1 0.98 0.91 Intensive 1 0.99 0.93 Extensive 1 0.95 1.09 Family farm income 1 0.79 1.14 Total expenditure 1 0.85 0.85 http://www.multisward.eu Summary and Outlook Switzerland: • A reduction of the total budget of direct payments (-15%) is • slightly reducing production (about 1%) • slightly reducing intensive used grassland area (1%) • reducing extensive used grassland area (5%) • A reduction in the total budget of direct payments (-15%) + an “extensive grassland-favourable” distribution of the payments is • slightly reducing production (about 2%) • reducing intensive used grassland area (7%) • increasing extensive used grassland area (9%). http://www.multisward.eu Summary and Outlook Wales: • Up-coming CAP-change is the move from historically based SFP to area based SFP (decoupled since 2003) • Likely transfer of budget from lowland to LFA farms. • May cause loss of lowland grassland. http://www.multisward.eu Thank you Grassland usage under a reduced policy budget: FARMIS applied to Switzerland by Judith Hecht and Simon Moakes Further information MultiSward go to: http://www.multisward.eu/ Further information FARMIS go to: http://www.google.de and type: farmis vti http://www.vti.bund.de http://www.multisward.eu http://www.multisward.eu Change in the Direct Payment (DP) System of Switzerland Payment category For activity Unit Basis year + Baseline: Old DPS Scenario: New DPS Payments for arable land Cereals, Maize Other arable crops Sugar beat Fruits Vegetables CHF / ha CHF / ha 0 1000 800 800 reduce CHF / ha CHF / ha CHF / ha CHF / ha 1900 0 0 450-1500 0 1800 1800 2000-3000 increase CHF / ha 1900 - 2500 500 Payments for biodiversity Payments for animals Payments for the protection of resources http://www.multisward.eu … Extensive meadow Less intensive meadow Extenso production CHF / ha 400 800 RGVE CHF / 450 - 690 0 RGVE Not activity specific CHF / 0 5000 (farm) farm Change of relative profitability between production activities eliminate add Characteristics of FARMIS • • • • Sector consistent farm group model Farmers maximise income Calibration for basis year 2006/ 2007 To analyse impacts • that cause a change of the relative profitability between production activities/ farm groups/ regions • that are initiated by changes in agricultural policies/ technical or economic conditions • that commence an adaptation of the behaviour of farmers • that occur on different levels http://www.multisward.eu Processes Data FADN-Farm Other statistics Accounts Data processing Generation of representative farm groups Basis year Calculation of input/ output coefficients Target year Forward projection of coefficients/ parameters Optimisation Farm model Calibration PQP-Term Scenarios Results http://www.multisward.eu Solution: Basis year Solution: Reference Solution: Scenarios Steps of development Year Author 96-98 Jacobs 97-99 Schleef Project Establishment of FARMIS for the German agricultural sector (based on Excel) Analysis of policies for N-reductions (based on Excel) 2001 Bertelsmeier, Further development of FARMIS; main ... Offermann module transferred to GAMS, MTR; reform of the milk sector 2004 Gocht, Expansion of EU-level (EU-FARMIS), ... Hüttel, transferring complete module to Küpker, GAMS; analysing reforms of the CAP Offermann http://www.multisward.eu Steps of development Year Author Project 2005 Hüttel, ... Küpker, Kleinhanß, Offermann Expansion and usage for different EUprojects (EDIM, GENEDEC; EUCEEOFP) 2007 Sanders … Development of FARMIS for Switzerland (CH-FARMIS): Impact of liberalisation on organic and non-organic farms Conception of environmental indicators (CH-FARMIS): Cost-effectiveness of organic farming for achieving environmental policy targets in Switzerland 2010 Schader http://www.multisward.eu Concrete research questions Economic impact of agricultural liberalisation policies on organic farming in Switzerland (Sanders, 2007) Direct payment concept of the «Vision Landwirtschaft». Impacts on agriculture in Switzerland. Internal project report (Sanders, Rudmann, Hecht, 2010). Which farmers are benefiting from liberalisation policies? Which farmers are benefiting from a change in the direct payment system? Which policy instruments/ technical innovations are efficient for maintaining grassland based production systems? http://www.multisward.eu Calibration of FARMIS Positive Mathematical Programming (PMP): – Switch from normative LP, to a positive model, Paris and Howitt (1995) – Assumption: the empirically measured allocation of resources on farms is micro-economically optimal (Difference between LP and empirical solution = hidden costs) Main advantages compared to Linear Programming: – No overspecialisation of the farms – Smooth and flexible reactions of the farms More realistic and plausible results in regional- and sector models http://www.multisward.eu 5. Calibrate FARMIS Switch from normative Linear Programming (LP) to Positive Mathematical Programming (PMP), Paris and Howitt (1995): • Assumption: the empirically measured allocation of resources on farms is micro-economically optimal • Difference between LP and empirical solution = hidden costs Main advantages compared to LP: • No corner solutions (overspecialisation of the farms) • Smooth and flexible reactions of the farms Consequences of PMP: More realistic and plausible results on sector level http://www.multisward.eu Suggested technical implementation and expected results of scenario 1 Scenario 1: Moderate (extreme or low) reduction of the total CAP budget Suggested technical implementation: A distribution of the reduced budget is not known. Therefore, the budget for each measure will be reduced via a homogenous % flat-rate. Expected results: no impacts on the relative profitability impacts on farm income Solution: DG-Agri has a proposal on the new distribution of budget between measures (eliminated/ new measures) http://www.multisward.eu Change of grassland usage based on a change in DPS of CH Grassland intensity levels of CH Different scenarios Old DPS New DPS Different farm groups of CH http://www.multisward.eu What can you do with FARMIS? Analyse impacts that cause a change of the relative profitability between production activities/ farm groups/ regions that are initiated by changes in agricultural policies/ technical or economic conditions e.g. changes in supply based policy instruments (direct payments, taxes on inputs, new policy measures, etc.) e.g. changes in input and output coefficients that commence an adaptation of the behaviour of farmers in terms of their resource allocation (leading to another production output, farm structure and even to changed impact on environmental indicators) that occur on different levels the farm level (dairy cow farms, arable farms, etc.) the regional level (valley, hill, mountain) the sector level http://www.multisward.eu